How Visa, Mastercard are building a road map for in-car commerce

Visa and Mastercard are building ecosystems to link merchants and drivers for in-car payments as part of their internet of things strategy — while also pushing to standardize disparate systems promoted by automakers, infrastructure providers and fintechs for in-car commerce.

While much of the world is sheltering at home to deter the spread of coronavirus, there's still a need for essential workers to travel — and a risk of using ride-sharing apps or public transit instead of a private vehicle. Thus, there is an opportunity for the development of in-car payments technology, which could allow consumers to pay for gas or food without handling cash or other potentially infected surfaces.

“With COVID-19, there will be greater usage of oil companies’ fueling apps that that let you pay for gas without using cards,” said Richard Crone, CEO of U.S.-based Crone Consulting.

In-car commerce is still fragmented, with barriers including a lack of interoperable systems, multiple initiatives from different players, and safety concerns about distracted driving. The global number of connected cars with built-in data connectivity is just 143 million, according to ABI Research. Meanwhile, many drivers use Android Auto or Apple CarPlay to connect their smartphones to their dashboards in the absence of built-in communications.

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“By getting into car commerce, Visa and Mastercard can prevent themselves from being displaced and, by capturing the everyday spending consumers will do from connected cars, ensure growth in volume over their networks,” said Bryce VanDiver, a partner at U.S. consultancy Capco.

Mastercard sees itself as playing a similar role in creating connected car standards as it did for EMV cards.

"Our role is to ensure that in-car payments are safe and simple for consumers, merchants and card companies," said Femi Odunuga, Mastercard’s senior vice president for digital future, products and innovation. "We’re still in a nascent stage for car commerce. The technology is there, and initiatives are progressing, but adoption is tempered by the fact that you need vehicles to operate the requisite software, merchants to sell on these platforms, and consumers to transact.”

Security is critical if consumers are to be willing to pay via connected cars. Visa sees cloud-based IoT payments and authentication via biometrics such as voice-activated commands as the way to bring connected commerce to cars at scale.

“Visa’s approach relies on its Visa Ready tokenization platform integrating with e-wallets such as Apple Pay to tokenize connected car payments and prevent consumers’ cards from being exposed,” said Bisi Boyle, Visa’s vice president of IoT.

Mastercard also sees biometrics and tokenization as key to securing IoT ecosystems.

Mastercard is working with GM, Honda, IBM, Amazon and other merchants, and technology startups to create car commerce platforms.

“It’s a collaborative effort across different providers and ecosystems,” Odunuga said. “We come up with use cases, prove the concepts with partners internally in our lab, and conduct pilots.”

Mastercard realizes its business will change in the IoT era, with business models emerging that are data- or service-related and don’t relate to its traditional revenue streams. It has partnered with in-car navigation and mapping systems provider Here Technologies to integrate digital payments and mapping and explore uses cases for mobility-as-a-service and location-based services.

“We’ll see many partnership announcements, because we’re learning that everyone has a role to play, and we’re not competing for slices of the pie,” said Odunuga. “We have an open partnership model. We don’t draw a line and say we won’t serve any entry point. The experience in the car is what matters, and, whether it’s music, entertainment, or travel, we want to serve all these areas.”

Mastercard is thinking outside the vehicle in the context of car commerce. Partnering with self-service kiosk provider Zivelo and QSR chain Sonic Drive-In, Mastercard has developed an AI-enabled voice ordering and recommendations system for dynamic menus at QSR drive-throughs.

"In the future, enhanced ordering experiences could be integrated deeper into the car commerce ecosystem," said Odunuga. "The drive-through could recognize cars using computer vision and provide specific discounts or experiences as part of a loyalty program. We’re also working in the convenience store space on unattended retail pilots, which could be another opportunity to tie into gas purchases and car commerce."

In January, Mastercard and Daimler invested in German fintech ThinxNet, whose subsidiary Ryd operates the Ryd Pay multimerchant in-car marketplace for buying fuel, tolling, and electric vehicle charging. Drivers use Ryd’s app to see participating gas stations and activate fuel pumps on arrival. They then drive away with payment handled by Ryd in the background. Ryd can either be included in new car models by automakers or retrofitted to older models through vehicle on-board diagnostics (OBD) systems.

“The OBD enables the car to send payment to a specific pump, via the cloud, instead of using proximity NFC connections,” said Odunuga. “Vehicles can pay upfront using cards that are on file before getting to a fuel station. Ryd is a neutral multimerchant platform that has potential to scale, and ThinxNet has secured innovation projects with German automakers such as Daimler to embed Ryd Pay into the new generation of infotainment and navigation systems. Ryd Pay is starting to roll out in Germany and we’ll support its expansion across Europe.”

Visa and Mastercard see a role for issuers in car commerce, with the potential for co-branded credit cards from banks and automakers to be embedded in drivers’ digital wallets to earn rewards for car repairs.

“One use case is that you buy a new car, and the salesperson asks, ‘Do you want your manufacturer’s co-branded card to be issued to your digital wallet in your car?’ ” said Boyle. “The card is digitally issued in the car showroom, and you start using it immediately to buy gas or coffee and get rewards that the dealership uses to pay for oil changes or new tires.”

Visa has been working with Honda since 2015 on connected cars.

“At the 2017 Consumer Electronics Show, Visa and Honda showed a demo based on parking and fuel payments,” said Boyle. “Now we’ve progressed to the Honda Dream Drive prototype, which we showed at CES 2019 in a Honda Passport, and which offers multiple types of purchases.”

Developed with Connected Travel, the Honda Dream Drive leverages Android Auto and Apple CarPlay and enables drivers to use voice controls to buy gas, pay for parking, order food ahead from restaurants and use entertainment features integrated into the dashboard. The prototype includes a Honda digital wallet, in which payments are tokenized by Visa token service providers. Honda has added other partners such as Mastercard and PayPal to its Dream Drive project.

In January 2019, Visa announced a partnership with Sirius XM’s Connected Vehicles subsidiary to enable tokenized in-car payments using voice and touchscreen commands. The companies designed a Sirius XM e-wallet to be used for shopping, coffee orders, locating and paying for gas and parking, and paying tolls. The deal with Sirius XM frees Visa from having to work with individual automakers, since the satellite radio service operator integrates directly with manufacturers.

“At CES 2020, we did a live demo of how the e-wallet works,” said Boyle. “We drove into a gas station, and ordered gas by voice to get the pump to turn on. The receipt appeared in the screen and we drove away. We’re now talking to all the automakers, asking them to let us know when they want to include the e-wallet platform in their application rollout.”